Have you been to the gas station during the past few days? If so, you may have noticed unusually long lines to fill up. While you may have pulled in simply because you noticed your fuel light was illuminated, many others were gassing up because they follow the price of crude oil.
Currently, the price of crude oil is the highest it has been in more than 3 years. And, analysts expect the commodity to become even pricier in the foreseeable future.
Crude Oil Costs Correlate Directly with Gas Costs
Why should you care about the cost of crude oil? It’s the main ingredient in gasoline. Crude oil prices have been on a steady upward trajectory since June 2017 and recently surpassed $68.60 per barrel (one barrel contains 42 gallons). Crude oil the single most important commodity globally. Refineries convert crude oil into various products, including gasoline. On average, U.S. refineries produce about 20 gallons of automobile-fueling gasoline per barrel of crude. It takes an exorbitant quantity of crude oil to keep American vehicles moving.
Why the Price Hike?
As of the last day in April, the national average price per gallon of regular gasoline was $2.81. One year ago, the average price per gallon was $2.39. According to AAA, nearly 15% of gas stations across the United States are selling gas for $3-plus per gallon. Drivers in Washington, California, Oregon, Alaska, Hawaii, Pennsylvania, and Connecticut are paying top dollar for gas. Drivers in Florida, Georgia, Delaware, and New Hampshire pay the lowest prices for gas.
Oil prices are soaring for myriad reasons. First, because the economy is strong, demand for crude oil has grown (more people are driving.) While demand is increasing, supply has decreased as OPEC has instituted production slowdowns in an effort to use existing oil supplies. In the United States, oil supplies are down more than 1 million barrels this year than they were this time last year.
While this news about gas prices isn’t great – especially as we approach the busy summer driving season, it could be worse. Much worse. Don’t forget that five years ago, gas prices in the United States were averaging an astounding $3.60 per gallon. Compared to that, today’s prices are a bargain!